WASHINGTON (AP) — U.S. job growth surged and unemployment fell last month, an unexpected show of strength that may prove costly to homebuyers and businesses who were counting on sharply lower interest rates to lower the cost of buying everything from refrigerators to homes.
Employers added 256,000 jobs last month, up from 212,000 in November, the Labor Department reported Friday.
Unemployment, which was expected to hover around 4.2%, fell to 4.1% last month. Health care companies added 46,000 jobs, retailers 43,000 and government agencies at the federal, state and local levels 33,000.
The final jobs report of 2024 underscores that the economy and hiring were able to grow at a solid pace even with interest rates much higher than they were before the pandemic. As a result, the Federal Reserve could be much less likely to cut borrowing costs again in the coming months. The Fed cut its rate three times last year in part out of concern that hiring and growth were flagging.
Overall, the solid jobs figures suggest the economy is entering a post-COVID period of steady growth, higher interest rates, low unemployment, and slightly elevated inflation.
“There’s just no need for additional cuts in the Fed’s rate any time soon,” said Joe Brusuelas, chief economist at RSM, an accounting and tax advisory firm.
Brusuelas says that the economy, fueled in part by greater productivity, can grow at a steadily faster rate than it has since the Great Recession 16 years ago. Low unemployment can fuel healthy consumer spending. Yet greater demand can also push up inflation.
“The economy is going to grow at a much higher equilibrium level, which implies higher inflation and higher interest rates relative to what we got used to from 2000 to 2020,” he said.
The U.S. continued to create jobs steadily throughout 2024, 2.2 million in all. That is down from job growth of 3 million in 2023, 4.5 million in 2022 and a record 6.4 million in 2021 as the economy bounced back from massive COVID-19 layoffs. But last year's average of 186,000 new jobs a month still slightly exceeds the pre-pandemic average of 182,000 from 2016-2019, solid years for the economy.
U.S. markets tumbled on the release of December's jobs numbers as investors sensed the odds of further interest rate cuts have faded. But rates are still painfully high for Americans trying to buy a house, a car, or even a kitchen appliance. Mortgage rates have risen for four consecutive weeks to reach the highest level since July.
Average hourly wages rose 0.3% from November and 3.9% from a year earlier. The year-over-year wage gain was slightly less than economists had forecast.
Over the past few years, the strength of the U.S. economy and the job market have surprised almost everyone. Responding to inflation that hit a four-decade high two and a half years ago, the Fed raised its benchmark interest rate – the fed funds rate -- 11 times in 2022 and 2023, pushing it to the highest level in more than two decades.
A much-anticipated recession never happened. Companies kept hiring, consumers kept spending, and the economy continued to roll. In fact, U.S. gross domestic product – the nation’s output of goods and services -- has expanded at a robust annual pace of 3% or more in four of the last five quarters.
Inflation has come down, too, from a peak of 9.1% in June 2022 to 2.7% in November. The drop in year-over-year price increases gave the Fed enough confidence to cut rates three times in the last four months of 2024.
But Fed officials signaled in December that they planned to be more cautious about rate cuts this year. They now project just two rate reductions in 2025, down from the four they envisioned back in September. Progress against inflation has stalled in recent months, and it remains stuck above the Fed’s 2% target.
“There is more to do to lower costs, but we’ve taken action to lower prescription drug prices, health insurance premiums, utility bills, and gas prices that will pay dividends for years to come,” President Joe Biden said Friday. “This has been a hard-fought recovery, but we’ve made progress for working families, showing what can be accomplished when we build from the middle out and bottom up.”
Biden is handing a largely solid economy to his successor, President-elect Donald Trump, though many Americans have been hit hard by the price spikes of the past three years and have generally been pessimistic about the economic outlook.
Many businesses are still scrambling to find workers.
Optimistic about 2025, Matt Harding, chief concept officer at Piada Italian Street Food, plans to open seven new stores and hire another 250 people this year. The fast casual restaurant chain, based in Columbus, Ohio, now operates 58 stores in seven states and has 1,200 employees. Hourly pay has risen 35% to 40% since 2020 to a starting wage as high as $16.45 for typical workers, helping to reducer turnover.
UCHealth, a nonprofit that runs hospitals and clinics in Colorado, Wyoming and Nebraska, is struggling to find skilled clinical workers – nurses, physical and occupational therapists, said Angela Spinelli, UCHealth’s senior director of talent acquisition.
“The market has not softened for these positions,’’ Spinelli said. UCHealth, which hired 9,400 people last year and currently has 1,200 openings, has raised pay and focused on “growing our own’’ – promoting within the company and offering tuition to employees to learn new skills to move from, say, a health aid to a nursing position.
Still, a job hunt can still be tough in the current environment.
Mike Pincus was out of work for 20 months after the startup where he’d worked went out of business. Pincus, 55, had previously spent 35 years as a personal trainer and wanted to try something new. “I didn’t know exactly what I wanted to do,’’ he said. “But I knew what I didn’t want to do.’’
The search proved frustrating. Pincus said that many employers seemed to use algorithms to weed out unconventional applicants.
“If a human actually looks at your resume, it’s a very quick glance over,’’ he said.
Visiting a friend at a bike shop, his “happy place,” Pincus applied and received a job there. He’s been a manager at Trek's Ventura, California, shop since early December.
“I love it,’’ he said. “I didn’t know I’d love it. I didn’t know I could do it.’’
AP Writers Christopher Rugaber and Josh Boak in Washington and Anne D'Innocenzio in New York contributed to this story.
A hiring sign is displayed at a restaurant in Skokie, Ill., Wednesday, Jan. 8, 2025. (AP Photo/Nam Y. Huh)
A hiring sign is displayed at a fitness center in Riverwoods, Ill., Sunday, Jan. 5, 2025. (AP Photo/Nam Y. Huh)
